Methods of payment, direct takeovers and privately-held targets

Evidence of bidder's return on takeovers

Fauzias Mat Nor, Razali Bin Ismail

    Research output: Contribution to journalArticle

    Abstract

    This study examines whether the proposed acquisition announcement on methods of payment has an impact on the bidder's returns behaviour. The analysis uses the event study technique, the naïve model, a model that is based on the market model with constrained α = 0 and β = 1 to compute the abnormal returns and to evaluate the effects of the proposed acquisition announcement on the bidder's returns. The study finds that Malaysian investors appear to be not in favour of cash-based acquisition to be done directly by the bidding company as shown by the significant negative results on the bidder's average residuals after the announcement date. The same goes for acquisition that targets private limited company. The insignificant results obtained on the announcement date itself may give an indication that such announcements do not really bring "surprisingly good news" to investors. However, the significant positive results of the bidder's average residual on acquisition by equity on and after the announcement, either to be done directly or on private limited takeover, may give an implication that the use of equity conveys favourable information about the bidding firms and are value relevant.

    Original languageEnglish
    Pages (from-to)19-45
    Number of pages27
    JournalJurnal Pengurusan
    Volume25
    Publication statusPublished - Jul 2006

    Fingerprint

    Method of payment
    Announcement
    Bidding
    Equity
    Investors
    News
    Market model
    Cash
    Event study
    Abnormal returns

    ASJC Scopus subject areas

    • Business, Management and Accounting (miscellaneous)
    • Accounting
    • Business and International Management

    Cite this

    Methods of payment, direct takeovers and privately-held targets : Evidence of bidder's return on takeovers. / Nor, Fauzias Mat; Ismail, Razali Bin.

    In: Jurnal Pengurusan, Vol. 25, 07.2006, p. 19-45.

    Research output: Contribution to journalArticle

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